Taoiseach Martin: "We did not bail out the banks!"

Brendan Burgess said:
It is pure semantics. The media and politicians seem to insist that the banks in some way benefitted from the guarantee. In fact, it was the ordinary depositors, pension funds, bond holders and credit unions who got the benefit.

I have heard the Credit Unions saying that they were never bailed out. They would have nearly all gone bust, if the government had not guaranteed their deposits in Anglo and the Irish Nationwide.

What is galling about this is that the depositors in Anglo and Irish Nationwide got a higher rate of interest because of the perceived risk and yet the deposit was retrospectively guaranteed by the taxpayer.

Brendan
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When you say they would have all gone bust.
Would the banks not also have gone bust. Was it not a house of cards.
If the banks had gone bust would the banking system not have collapsed.
If all that happened wouldn't the tax payer also being paying for that also.

So bailing one , bailed out all.

While it certainly wasn't the only way to go (Iceland etc), has it worked out in the end?
Well other then the moral hazard of repeating the same thing over.
 
moneymakeover said:
If the bondholders are bailed out then technically it's a bailout even if the shareholders are not.

IMHO
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Possibly so.

I think there's a general misunderstanding of how creditor hierarchies and such work from the public. Lots of people seem to think "bailing out the banks" benefited "the banks", when in actual fact the owners of the banks were pretty much wiped out. The benefit was to certain creditors (depositors/bondholders), not really to the banks as such.
 
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Why are people obsessed with technicalities here?

the question should be "Who benefited from the bailout?"

And the answer is that it was the bondholders and ordinary depositors - The pensioners, the credit unions, the pension funds.

That is really what matters.

Shareholders lost their investment and rightly so.

Most of the the top executives and board members lost their jobs and rightly so.

But the ordinary staff didn't lose out at all.

Brendan
 
Brendan Burgess said:
Why are people obsessed with technicalities here?
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Wasn't that the point of you starting the the thread Brendan?

Brendan Burgess said:
the question should be "Who benefited from the bailout?"

And the answer is that it was the bondholders and ordinary depositors - The pensioners, the credit unions, the pension funds.

That is really what matters.

Shareholders lost their investment and rightly so.

Most of the the top executives and board members lost their jobs and rightly so.

But the ordinary staff didn't lose out at all.

Brendan
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I'm not convinced of the most.

Be that as it may. Lots of other people got out from lots and debt and start over, in other sectors.
The ordinary staff may not have lost out directly, but most of the banks have massive cuts to their head counts over the past few decade or so.
So I'm sure the semantics is a moot point.

I think the question is really could it happen again, has anything significantly changed it terms of oversight, and regulation, that would make a difference. Has anything changed in the political culture that no one is responsible for anything. Keeping everything at arms length etc. Martin seems to have forgotten that we haven't forgotten.
 
WolfeTone said:
Ordinary depositors, with deposits to the tune of €20,000 or less, were already covered under the Deposit Guarantee Scheme. They were not bailed out.
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Very true, it's unfair saying ordinary depositors were bailed out.
 
Brendan Burgess said:
No, the banks were not bailed out. And he is right to say it even if the public think it sounds stupid. The main beneficiaries were the ordinary depositors, pensioners and credit unions. We should be highlighting this. Brendan
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I'd say the main beneficiaries were the Irish people as the country couldn't have functioned without a working banking system.

In 2008 the Irish banks we unable to roll over their foreign borrowings so the Government ,issued a blanket guarantee of all liabilities of the banks (which included deposits) through the Credit Institutions Financial Support Scheme (CIFS). This is an important point in this discussion. The government did not 'bail out' the banks, i.e. give them liquidity or guarantee their shareholders. It guaranteed their liabilities (which included deposits) for a short time. Calling this 'bailing out' the banks is just plain wrong.

(There had been a previous deposit guarantee scheme was set up in 1995, which implemented a 1994 EU directive and provided for holders of eligible deposits to be compensated for 90% of their deposits up to a maximum equivalent to ECU 15,000.)

In 2009 the Government removed the blanket guarantee and reduced the cover of the guarantee, under the Credit Institutions (Eligible Liabilities Guarantee) Scheme (ELG Scheme). The ELG scheme was subsequently extended for all retail deposits until June 2012. (Retail bank deposits are now guaranteed for a level of 100,000 euro under EU Directive 2014/49/EU, which was transposed into Irish law in 2015.)
 
The average man in the street, and the average woman, does not have any inkling of how the banking system works in any great detail.

So while it is true that the banks ie the owners, the shareholders were not bailed out, this is not what they understand. Trying to explain the banks balance sheet and how it would have affected the economy if the government had not not stepped in, is a pointless task.

And the Taoiseach should be well aware of that and not have said what he said - it shows political incompetence of the highest order
 
AlbacoreA said:
I think the question is really could it happen again, has anything significantly changed it terms of oversight, and regulation, that would make a difference. Has anything changed in the political culture that no one is responsible for anything. Keeping everything at arms length etc. Martin seems to have forgotten that we haven't forgotten.
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Things have significantly changed through regulation, this is summarized as banks have restricted certain activity as it was either banned or capital rules made it unprofitable. Banks are very much now service providers to clients, any trading activity is done on behalf of clients, there is no longer any trading their own money.

The capital held is much more robust to withstand market shocks, stress testing etc. There has essentially been a huge investment in the last decade to improve the banking system.

I think it has largely worked and the recent Covid pandemic has shown that banks are in a much better position to withstand large losses from loans.
 
jpd said:
So while it is true that the banks ie the owners, the shareholders were not bailed out, this is not what they understand.
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A bank is not just a capital structure!

It has responsibilities to its shareholders, its customers, counterparties, and its staff.

Sure, of course the shareholders lost it all. But the customers, counterparties and staff were all bailed out to some extent. MM's claim that "We did not bail out the banks" is just wrong, even with his subsequent qualification.
 
WolfeTone said:
Ordinary depositors, with deposits to the tune of €20,000 or less, were already covered under the Deposit Guarantee Scheme. They were not bailed out.
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All depositors were bailed out. Whether they had an existing guarantee in place or not.

Let's be clear. I agree with paying 90% of deposits up to €20k.

But that still means that they were bailed out.

I very much doubt that there was enough in the fund to meet that guarantee.

I was bailed out as a depositor but not as a shareholder.

Brendan
 
First of all, what a hill to die on! And of all people to bring this up again, MM!

PMU said:
In 2008 the Irish banks we unable to roll over their foreign borrowings so the Government ,issued a blanket guarantee of all liabilities of the banks (which included deposits) through the Credit Institutions Financial Support Scheme (CIFS). This is an important point in this discussion. The government did not 'bail out' the banks, i.e. give them liquidity or guarantee their shareholders. It guaranteed their liabilities (which included deposits) for a short time. Calling this 'bailing out' the banks is just plain wrong.
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For me, the question is were the banks in a position to be able to meet their obligations, as a going concern, without intervention by the state - self-evidently not. The state intervened to ensure viability of the institutions. The mechanism of intervention is irrelevant, who the actual beneficiaries were is irrelevant, the protection of the banking system is irrelevant, the States actions were not risk-free interventions. Obligations entered into, independent of the State, required the State to act so the obligations could be met -> they were bailed out.

To suggest that a 'bail out' is limited to a liquidity intervention or a shareholder value guarantee is very disingenuous in my view. Also remember that NAMA purchased bank owned assets, with public money, at the "long-term economic value" i.e. above market value. I cant see how that's not supplying liquidity.

Brendan McDonaghs opening statement to the Banking enquiry
Ultimately, of the €31.8 billion that NAMA paid as consideration for the acquired loans, €5.6 billion was considered to be State Aid i.e. NAMA paid the financial institutions €5.6 billion more than the private sector market would have paid them at the time of acquisition....In addition, NAMA’s acquired loans were valued by reference to a property collateral valuation date of 30 November 2009 and, as a result, NAMA had to absorb losses arising from the impact of the 25%-30% decline in Irish property values which took place subsequently right up to the end of 2013... ; thus, if the participating institutions had to sell to private investors, I estimate that the acquisition price would have been reduced by another €4.5 billion. Essentially, therefore, the institutions would have been paid about €22 billion by the market rather than the €32 billion that NAMA did pay for the loans.
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If a company goes bust and I buy it and its liabilities am I bailing it out?
The State bought AIB and guaranteed it's creditors... or am I missing something?
It bought a chunk of BOI and did the same.

WolfeTone said:
Ordinary depositors, with deposits to the tune of €20,000 or less, were already covered under the Deposit Guarantee Scheme. They were not bailed out.
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How was that not a guarantee to bail out those depositors?
 
The real cost of the collapse in the banking sector goes way beyond the bailout/recapitalisation. Getting hung up on what the direct costs were (and now are net of sales of shares and loan books) is to miss the bigger picture. We owe over €200 billion because of political, fiscal and monitory and central bank policy actions and failures. Those failures went back decades. If we want to avoid repeating those failures we need to avoid a narrative that suggests the Bank "Bailout" was the problem. No matter what the Government did we were screwed.
 
Purple said:
How was that not a guarantee to bail out those depositors?
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Its like an insurance protection against dodgy banks. It builds confidence between depositors and banks holding those deposits. It is a good thing in general.
The banks were not able to fulfill their obligations under the scheme , so they required a bailout from the government. Which is repayable by taxes.
So I suppose the taxpayer bailed out the State by taking on debt to bailout the banks who needed to protect the depositors who are the taxpayers to begin with.

What if you didn't have any money on deposit, but are a taxpayer?
 
WolfeTone said:
Its like an insurance protection against dodgy banks. It builds confidence between depositors and banks holding those deposits. It is a good thing in general.
The banks were not able to fulfill their obligations under the scheme , so they required a bailout from the government. Which is repayable by taxes.
So I suppose the taxpayer bailed out the State by taking on debt to bailout the banks who needed to protect the depositors who are the taxpayers to begin with.
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Yep, but it was a bailout either way.

WolfeTone said:
What if you didn't have any money on deposit, but are a taxpayer?
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Then you are part of the group I'm in.
 
The key question is "Who benefited?"

And the answer is the depositors.

Not the shareholders
Not the borrowers
Not the top executives or directors

Anglo and INBS disappeared so they clearly did not benefit.

Brendan
 
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